Announcing 'a cut' in Pakistan's defence expenditure, Prime Minister Yousuf Raza Gilani on Monday said it was a 'tangible display' of its desire for peace with its neighbours and indicated that he wanted India reciprocate the move.

Making a policy statement in parliament, Gilani said, "As a measure of our tangible display to seek peace with our neighbours, we have decided to freeze, actually reduce, the defence budget when seen in the context of inflation and the rupee-dollar parity."

Without naming India, he added: "We hope to see a reciprocal gesture from our neighbour for the sake of peace and prosperity of the region."

The Pakistani premier, however, did not give a figure on the proposed reduction in the defence budget which was Rs 275 billion last year and equal to nearly three per cent of the GDP.

Gilani's statement came in the backdrop of a major financial crisis faced by Pakistan. Rising global food and oil prices have fuelled double-digit inflation since Gilani's Pakistan People's Party-led coalition came to power in March.

Outlining the basic tenets of the country's security policy, Gilani said Pakistan's "defence is based on the strategy of minimum, essential and credible deterrence and that we shall not enter into any arms race".

Noting that Pakistan is 'located in a geo-strategically important but a turbulent region', he said, "We live and operate in a volatile environment. We cannot, therefore, afford to remain oblivious to our defence needs."

"I wish to categorically state that Pakistan stands for peace with honour. We shall continue to strive for it without compromising on our national interests," Gilani said.

He also announced a new mode for presenting the country's defence budget in the National Assembly or lower house of parliament. Currently, the budget of the three services, ordnance factories and other defence establishments is presented as 'a one line allocation'.

"It is not approved separately but in a consolidated form for all defence services. After approval of the budget, ministry of defence apportions the allocation to the three services and other defence organisation," Gilani remarked.

"My government has now decided to present the defence budget estimate in a format reflecting the estimated expenditure under major 'heads' in the parliament. I am pleased to inform you that the ministry of defence and chief of army staff have fully endorsed the revised format of the defence services budget estimates," he said.

The PPP and its ally PML-N had earlier said that they would break from tradition to debate the defence budget in Parliament.